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Stocks Fall With Emerging Currencies as Treasuries Rise

Spools of Copper Wire Sit in Hamburg
Copper fell 0.2 percent. Photographer: Krisztian Bocsi/Bloomberg

Stocks fell, pushing the Standard & Poor’s 500 Index to a third weekly loss, and Treasuries rose amid a slump in emerging-market currencies and weaker corporate earnings. Copper dropped for an eighth day, the longest streak since December 1998.

The S&P 500 slipped 0.7 percent to 1,782.55 as of 4 p.m. in New York, capping the first three-week retreat since May 2012. The Stoxx Europe 600 Index lost 0.3 percent. The Treasury 10-year rate fell four basis points to 2.65 percent, while Germany’s 30-year yields reached the lowest since August. Argentine dollar bonds dropped and Hungary’s forint plunged for a third day. The yen climbed against the dollar for its biggest monthly advance since 2012. U.S. natural gas slid 2.5 percent.

About $1.8 trillion has been erased from the value of equities worldwide this month as China’s economy slows and the Federal Reserve further cut stimulus. U.S. consumer confidence declined in January, according to the Thomson Reuters/University of Michigan final index of sentiment, and companies from Inc. to Mattel Inc. gave disappointing earnings reports.

“This week, we’ve seen synchronized volatility in the markets, with very weak currencies and disappointing Chinese manufacturing figures,” said Christian Stocker, a senior strategist at UniCredit Bank AG in Munich. “We need an increase in earnings momentum to see stock prices go higher.”

U.S. benchmark indexes are headed for their first monthly decline since August. Earlier this week, the Fed decided to reduce its monthly bond purchases by $10 billion. Three rounds of U.S. monetary stimulus helped the S&P 500 rise as much as 173 percent from a 12-year low in 2009.

Earnings Season

Amazon slumped 11 percent, the most since October 2011, after the world’s largest Web retailer reported profit and sales that trailed analysts’ estimates. Mattel sank 12 percent after a drop in Barbie doll sales weighed on results.

Of the S&P 500 companies that have reported results this earnings season, 79 percent beat analysts’ estimates, data compiled by Bloomberg show.

Google Inc. climbed 4 percent after its quarterly sales topped projections. Zynga Inc. surged 24 percent after the maker of “FarmVille” announced it will cut staff and buy a mobile-game developer.

The Thomson Reuters/University of Michigan final January index of consumer sentiment fell to 81.2 from 82.5 a month earlier, a report showed today. The median forecast of 68 economists in a Bloomberg survey called for 81 after a preliminary reading of 80.4.

Consumer Spending

Another report showed consumer spending in the U.S. climbed more than forecast in December even as incomes stagnated. Household purchases, which account for about 70 percent of the economy, rose 0.4 percent, after a 0.6 percent gain the prior month that was larger than previously estimated. The median projection of 81 economists in a Bloomberg survey called for a 0.2 percent rise.

About two shares declined for each that advanced in the Stoxx 600. The gauge has lost 1.8 percent this month, the most since June.

Electrolux AB lost 8.8 percent after the world’s second-biggest maker of home appliances reported quarterly profit that missed estimates. LVMH Moet Hennessy Louis Vuitton SA jumped 7.9 percent after the world’s largest luxury-goods maker reported a profit gain as growth in fashion and leather-goods sales rebounded.

Emerging Markets

The MSCI Emerging Markets Index dropped 6.7 percent in January. Markets in China, Hong Kong, South Korea, Taiwan, Malaysia, Indonesia and the Philippines are closed for holidays. Turkey’s benchmark stock gauge fell 1.3 percent after the nation’s trade deficit widened in December.

The forint dropped 0.9 percent versus the euro as Hungarian central bank President Gyorgy Matolcsy today pledged a “close alliance” with the government, which has advocated lower rates to spur recovery from recession.

Argentine dollar bonds fell the most in emerging markets on concern government measures from devaluation to rate increases aren’t enough to improve the country’s deteriorating debt payment capacity. The debt due 2015 fell 3.88 cents on the dollar to 85.75 cents, driving yields up to 19.12 percent, the highest since June 2012. The extra yield investors demand to own Argentine bonds over U.S. Treasuries widened 75 basis points to 1,142 basis points.

European Inflation

European government bonds rallied as slowing euro-area inflation boosted speculation the European Central Bank will take more measures to stimulate the economy. Spanish and Italian two-year rates fell to records after a report showed annual euro-area inflation dropped to 0.7 percent in January, missing analyst estimates for a 0.9 percent reading.

“The ECB did warn us that inflation would be low but I’m pretty much convinced that they didn’t expect it to be as low as it’s gotten to,” said Padhraic Garvey, head of developed-market debt strategy at ING Groep NV in Amsterdam. “This is clearly disinflation and we’re facing the threat of that going forward. It’s bullish for core bonds.”

The Bank of America Merrill Lynch Global Broad Market Index returned 1.4 percent in January as of Jan. 30, including reinvested interest, the most since December 2011. The gauge, which tracks more than 21,200 securities with a market value exceeding $45 trillion, shows yields are about 1.9 percent on average, down from almost 2.10 percent at the end of December and last year’s high of 2.27 percent in September.

Euro, Yen

The euro weakened 0.5 percent to $1.3486 while the yen gained 0.5 percent to 102.18 per dollar.

Copper declined 0.4 percent to $7,065 a metric ton, the eighth consecutive drop. Aluminum fell as much as 1.8 percent to $1,698.25 a ton, the lowest since July 2009. China is the biggest buyer of the metals.

Natural gas fell for a second day in New York, heading for the biggest weekly drop in more than a year, as forecasts for milder weather in February signaled reduced demand for heating fuel. Commodity Weather Group LLC said bitter cold across the lower 48 states next week will give way to higher temperatures along the East Coast from Feb. 10 through Feb. 14.

West Texas Intermediate crude fell from the highest level of 2014 amid speculation that prices have climbed more than justified. Oil fell 0.8 percent to $97.49 a barrel on the New York Mercantile Exchange.

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